Micronetics Agrees to Settle Merger Litigation

2012-07-30 17:10 ET - News Release

HUDSON, N.H. -- (Business Wire)

Micronetics, Inc. (NASDAQ: NOIZ) announced today that it has signed a
memorandum of understanding to settle the previously disclosed class
action lawsuit captioned In re Micronetics, Inc. Shareholder
Litigation, C.A. No. 7626-VCP pending in the Delaware Court of
Chancery and the lawsuit in the New Hampshire Superior Court entitled Constantinescu
v. Micronetics, et al., No. 226-2012-CV-490 and the newly-filed
action in the United States District Court for the District of New
Hampshire entitled Joshi v. Micronetics, Inc., et al., No.
1:12-CV-00285 (collectively, the “Merger Litigation”). The Merger
Litigation relates to the Agreement and Plan of Merger, dated as of June
8, 2012, by and among Mercury Computer Systems, Inc. (NASDAQ: MRCY, www.mc.com)
(“Mercury”), a new Mercury subsidiary, and Micronetics.

Micronetics agreed to the settlement solely to avoid the costs, risks
and uncertainties inherent in litigation, and without admitting any
liability or wrongdoing. The settlement provides, among other things,
that the parties will seek to enter into a stipulation of settlement
which provides for the conditional certification of the Merger
Litigation as a non opt-out class action pursuant to Court of Chancery
Rule 23 on behalf of a class consisting of all record and beneficial
owners of Micronetics common stock during the period beginning on June
10, 2012, through the date of the consummation of the proposed merger,
including any and all of their respective successors in interest,
predecessors, representatives, and the release of all asserted claims.
The asserted claims will not be released until such stipulation of
settlement is approved by the court. There can be no assurance that the
parties will ultimately enter into a stipulation of settlement or that
the court will approve such settlement even if the parties were to enter
into such stipulation. The settlement will not affect the merger
consideration to be received by Micronetics stockholders or the timing
of the special meeting of Micronetics stockholders scheduled for August
8, 2012.

Additionally, as part of the settlement, Micronetics has agreed to make
certain additional disclosures related to the proposed merger, which are
set forth below. The additional disclosures supplement the disclosure
contained in the proxy statement filed by Micronetics with the
Securities and Exchange Commission (“SEC”) on July 10, 2012 (the “Proxy
Statement”), and should be read in conjunction with the disclosures
contained in the Proxy Statement, which in turn should be read in its
entirety. Nothing in this press release or any stipulation of settlement
shall be deemed an admission of the legal necessity or materiality of
any of the disclosures set forth herein. Capitalized terms used herein,
but not otherwise defined, shall have the meanings ascribed to such
terms in the Proxy Statement.

The following disclosure replaces the last paragraph on page 20,
continuing onto page 21 of the Proxy Statement under the caption
“Background”:

On February 9, 2012, we received a non-binding written proposal from
Firm A to purchase the company for a price per share of $11.25 in cash.
The February 9, 2012 proposal from Firm A contemplated that Firm A would
retain existing management and employees at aggregate compensation
levels similar to the current levels, with appropriate incentives for
key employees. On February 10, 2012, members of our board of directors
discussed Firm A’s proposal with our financial and legal advisors. The
board of directors, in consultation with Cypress and Latham, met on
February 13, 2012 and February 15, 2012 to discuss Firm A’s proposal and
determined that Firm A’s proposal did not adequately value the company.
The board of directors instructed a representative of Cypress to
communicate to Firm A the board’s response to Firm A’s proposal to
acquire the company. On or about February 15, 2012, as directed by the
board, Cypress informed representatives of Firm A and its financial
advisor that our board of directors determined that the proposal did not
adequately value the company. On or about February 17, 2012, Firm A
delivered a second letter expressing an indication of interest in
purchasing the company at an increased cash purchase price of $12.00 per
share. The board of directors convened a meeting on February 21, 2012 to
review and consider the increased proposal from Firm A. During such
meeting, our board of directors, in consultation with our financial and
legal advisors, determined that such increased proposal did not
adequately value the company and instructed Cypress to communicate that
determination to representatives of Firm A and its financial advisor.

The following disclosure replaces the first full paragraph on page 21 of
the Proxy Statement under the caption “Background”:

On or about February 27, 2012, we received an unsolicited non-binding
written proposal from Firm B to acquire the company for a cash purchase
price per share of $10.00-$12.00. The February 27, 2012 proposal from
Firm B expressed that Micronetics’ management would be welcome additions
to Firm B. The board of directors discussed Firm B’s proposal during a
meeting of the board of directors held on February 27, 2012, in
consultation with our financial and legal advisors, and determined that
such proposal did not adequately value the company. On or about February
28, 2012, representatives of Cypress and Firm B, respectively, discussed
by telephone the company’s rejection of Firm B’s proposal.
Representatives of Cypress, acting on behalf of the company, also
discussed with representatives of Firm B and its affiliate the company’s
willingness to have Firm B and its affiliate, respectively, enter into
confidentiality agreements with the company.

The following disclosure replaces the first paragraph on page 22 of the
Proxy Statement under the caption “Background”:

Between April 11 and April 23, 2012, in accordance with the instructions
of our board of directors, representatives of Cypress contacted
potential strategic and financial buyers (including those mentioned
above) and provided confidential discussion materials to those parties
that executed confidentiality agreements with the company. In addition,
representatives of Cypress and members of our management met in person
and participated in conference calls with those potential buyers who had
continuing interest in a possible business combination or acquisition of
the company, including meeting with Mercury on April 13, 2012 following
their execution of a confidentiality agreement. Seven of the
confidentiality agreements contain standstill provisions currently
prohibiting the counterparties from making an unsolicited offer to
acquire Micronetics or asking Micronetics to waive such standstill
provisions.

The following disclosure replaces the third paragraph on page 22 of the
Proxy Statement under the caption “Background”:

On April 20, 2012, we received written indications of interest from
Mercury and Firm C, and oral indications from two additional parties,
which we refer to as Firms E and F, respectively. Firm C’s written
non-binding proposal indicated a cash purchase price of $9.00-$11.00 per
share, and that Micronetics’ existing engineering, sales and marketing
capabilities would be integrated into Firm C. Mercury’s letter of intent
proposed a cash purchase price of $13.00-$15.00 per share based on an
enterprise value of $66.4-$76.4 million, and expressed that Mercury
anticipated continuing at-will employment for all or substantially all
of Micronetics’ current employees following consummation of the
transaction, and would expect to provide equity based compensation as an
element of the overall compensation package for selected (but
unidentified) employees in a manner and at levels consistent with
Mercury’s current practice for its own employees. Mercury’s letter of
intent further provided that it was expected that key company personnel
would agree to remain with the company following the transaction
pursuant to agreements executed at the signing of the definitive
agreement and effective upon closing of the transaction. Firm E provided
an oral indication of a purchase price of $9.50-$10.50 in cash per
share, subject to approval by its board of directors. Firm F provided an
oral indication with respect to a cash purchase price of $10.00-$12.00
per share, subject to approval by its board of directors, and further
indicated its intention to provide a written indication the following
week. The closing price of our common stock on April 20, 2012 was $7.49
per share.

The following disclosure replaces the first paragraph on page 23 of the
Proxy Statement under the caption “Background”:

On April 26, 2012, we received a written indication of interest from
Firm F, who had previously provided an oral indication of $10.00-$12.00
per share, to acquire the company at a cash purchase price per share of
$11.37-$13.55. The April 26, 2012 letter from Firm F indicated that the
Company would continue to operate under its current management in an
acquisition by Firm F.

The following disclosure replaces the fourth full paragraph on page 23
of the Proxy Statement under the caption “Background”:

On June 1, 2012, the board of directors convened a meeting to consider
the revised terms of the merger, the status of definitive agreement
negotiations and the pending expiration of the company’s obligation to
negotiate exclusively with Mercury. During such meeting, the board of
directors determined, in consultation with its financial and legal
advisors, to extend exclusivity through June 3, 2012 and instructed
company management and the company’s advisors to continue discussions
with respect to the definitive merger agreement. On June 4 and 5, 2012,
the board of directors considered and extended exclusivity again through
June 7, 2012 in order to continue discussions with respect to the
definitive merger agreement. The board of directors determined to extend
exclusivity with Mercury because Mercury had indicated that it would
cease negotiating towards a transaction with the company in the absence
of exclusivity, and because the board of directors did not believe that
other bidders would exceed the firm price offered by Mercury.

The following disclosure replaces the existing disclosures contained
under the caption “Interests of Certain Persons in the Merger—Interests
of Executive Officers with respect to Mercury” beginning on page 40 of
the Proxy Statement:

Following the merger, Kevin Beals and Carl Lueders will continue as
senior management of the surviving corporation. Such officers and all
other holders of unvested options will receive options to purchase
shares of Mercury common stock due to the assumption by Mercury of
unvested options pursuant to the terms of the merger agreement. Other
options to purchase shares of Mercury stock may be granted to such
individuals under the terms of any post-closing employment arrangements
with Mercury.

Micronetics manufactures microwave and radio frequency (RF) components
and integrated subassemblies used in a variety of defense, aerospace and
commercial applications. Micronetics also manufactures and designs test
equipment and components that test the strength, durability and
integrity of communication signals in communication equipment.
Micronetics serves a diverse customer base, including BAE Systems,
Boeing, Cobham, EADS, General Dynamics, ITT Exelis, L-3 Communications,
Lockheed Martin, Northrop Grumman, Raytheon, Rockwell, Tecom Industries,
Teradyne, and Thales. Additional information can be found on our website
at www.micronetics.com.

Some of the statements contained in this news release are
forward-looking statements, including statements relating to the
proposed sale of Micronetics, Inc. The accuracy of these statements
cannot be guaranteed as they are subject to a variety of risks,
including but not limited to the inability to obtain stockholder
approval for the transaction, the inability to obtain regulatory
approval for the transaction, reductions in spending by certain of our
customers, yearly and quarterly fluctuations in our operating results,
trends and factors affecting our markets which may reduce demand and
pricing pressure on our products, our reliance on a limited number of
customers, risk that federal government contracts may be terminated at
any time, factors which may negatively affect our gross margins, our
ability to attract and retain key technical and management personnel,
our ability to operate and integrate acquired companies, our ability to
manage our growth, disruptions in supply or production, increased levels
of debt, future economic conditions in our industry and generally, as
well as other factors. The information in this release should be
reviewed in conjunction with Micronetics’ Annual Report on Form 10-K for
its fiscal year ended March 31, 2012 as well as its other filings with
the Securities and Exchange Commission.